Corporate and Commercial lawyer Kirsty Davey of Coodes highlights some of the legal considerations when planning sales promotions.
“January is a key time for special offers, with many companies offering money off their products to attract buyers. Promotions – from competitions to discounts – can be a great way for your business to encourage sales. Most promotions are covered by laws and voluntary codes that you need to familiarise yourself with. Failing to comply with these could result in your business having to withdraw a campaign and, of course, negative publicity for your business. In some cases, you could even face criminal prosecution.
“Many businesses seek to entice customers with a comparison between a discount and the previous price. If you want to do this, you need to ensure you state the most recent price as the previous price and that it was on sale at this price for at least 28 consecutive days. You can then reduce the sale price further, as long as you mention the last sale price. Businesses must be able to provide proof of all prices used in comparison exercises.
“If a business is asking entrants to pay to enter a prize competition, then the winner must be chosen on the basis of their skill, judgement or knowledge. This can be a tricky area because the combination of payment, chance and prize could make the competition an illegal lottery.
“A prize draw is a scheme in which prizes are allocated by chance but there is no entry charge. Your business can require a product purchase as a condition of entry but cannot increase the price of the product to cover the cost of the promotion. You can also make it a condition of entry to the draw that the participant has to accept certain conditions, such as providing personal information. It is important that this is laid out in clear terms and conditions. If the draw is open to all, the chances of success must be the same for everyone regardless of how they entered and the prize allocation must be by chance. Winners must immediately be able to get their prize, or be told how to claim it.
“It is important not to refer to a free gift (something that is offered to all or most customers) as a prize.
Freebies and BOGOF in sales
“Free products must be genuinely free. That means you cannot increase the price to absorb the cost of the ‘free’ product. For offers like buy one get one free, or 50% more, the promotion must reflect a genuine price reduction. The wording of the promotion must always be clear and not misleading and the business must state when the offer ends or that it is ‘subject to availability’.
“Many businesses choose to run introductory prices to launch a new product. These offers must be limited in time and the promoted product must be available after the promotion has finished at the same outlet but at a higher price.”
For advice on any of these issues, please contact Kirsty Davey at Coodes Solicitors on 01326 318900 or firstname.lastname@example.org.